Kaho`Ohanohano v. State

Decision Date23 July 2007
Docket NumberNo. 26178.,26178.
Citation162 P.3d 696
CourtHawaii Supreme Court
PartiesGeorge KAHO`OHANOHANO, Loren Andrade, State of Hawai`i Organization of Police Officers (SHOPO), Pauline Efhan, and Norma Caravalho, Plaintiffs-Appellants/Cross-Appellees and Jackie Ferguson-Miyamoto, Henry F. Beerman, Odetta Fujimori, Darwin J. Hamamoto, Pilialoha E. Lee Loy, Alton Kuioka, Colbert M. Matsumoto, and Georgina Kawamura in their official capacities as Trustees of the Employees' Retirement System of the State of Hawai`i and not in their individual capacities,<SMALL><SUP>1</SUP></SMALL> Intervenor Plaintiffs-Appellants/Cross-Appellees v. STATE of Hawai`i, Defendant-Appellee/Cross-Appellee/Cross-Appellant and City and County of Honolulu, Intervenor Defendant-Appellee/Cross-Appellant/Cross-Appellee and County of Kaua`i, County of Maui, and County of Hawai`i, Additional Defendants-Appellees/Cross-Appellees/Cross-Appellants.

Clyde W.M Matsui and Archie T. Ikehara (Matsui Chung Sumida & Tsuchiyama) for Defendant-Appellee/Cross-Appellee/Cross-Appellant State of Hawai`i.

Paul A. Schraff, Special Deputy Corporation Counsel (Dwyer Schraff Meyer Jossem & Bushnell) for Intervenor Defendant-Appellee/Cross-Appellant/Cross-Appellee City and County of Honolulu.

Margaret Hanson, Deputy County Attorney, County of Kaua`i for Additional Defendant-Appellee/Cross-Appellee/Cross-Appellant County of Kaua`i.

Cheryl Tipton, Deputy Corporation Counsel, County of Maui for Additional Defendant-Appellee/Cross-Appellee/Cross-Appellant County of Maui.

Katherine A. Garson and Joseph K. Kamelamela, Deputies Corporation Counsel, County of Hawai`i, for Additional Defendant-Appellee/Cross-Appellee/Cross-Appellant County of Hawai`i.

NAKAYAMA, ACOBA, JJ., and Circuit Judge TOWN, in place of DUFFY, J., Recused; and MOON, C.J., Dissenting, with whom LEVINSON, J., joins.

Opinion of the Court by ACOBA, J.

We hold, in this appeal by Plaintiffs-Appellants/Cross-Appellees George Kaho`ohanohano (Kaho`ohanohano), Loren Andrade (Andrade), Pauline Efhan (Efhan), Norma Caravalho (Caravalho), and the State of Hawai`i Organization of Police Officers (SHOPO) [collectively, Plaintiffs] and Intervenor Plaintiffs-Appellants/Cross-Appellees Jackie Ferguson-Miyamoto, Henry F. Beerman, Odetta Fujimori, Darwin J. Hamamoto, Pilialoha E. Lee Loy, Alton Kuioka, Colbert M. Matsumoto, and Georgina Kawamura, in their official capacities as Trustees of the Employees' Retirement System of the State of Hawai`i (ERS) [collectively, Trustees], from the June 24, 2003 judgment of the first circuit court (the court)2 in favor of Defendant-Appellee/Cross-Appellee/Cross-Appellant State of Hawai`i (the State) and against Plaintiffs and Trustees, that (1) Plaintiffs lack standing to seek declaratory and injunctive relief, and damages, regarding Act 100 of the 1999 Hawai`i legislative session, see 1999 Haw. Sess. L. Act 100, § 1 at 368 [hereinafter, Act 100], as codified under Hawai`i Revised Statutes (HRS) § 88-107 (Supp.2006), (2) Trustees have standing to seek declaratory and injunctive relief from the court regarding Act 100, (3) the arguments raised by the State as to Trustees concerning ripeness, mootness, the political question doctrine, sovereign immunity, and the statute of limitations are unpersuasive, (4) Act 100 violates article XVI, section 2 of the Hawai`i Constitution3 which prohibits the impairment of accrued benefits of ERS members, inasmuch as (a) the Proceedings of the 1950 Constitutional Convention of Hawai`i indicate that, article XVI, section 2 was intended to ensure that the State and local governments provide a sound retirement system for their employees; (b) the proceedings sought to confirm that the retirement system would fulfill its obligations into the future; (c) necessarily implied in article XVI, section 2 prohibiting impairment of accrued benefits is the protection of the sources for those benefits; (d) Act 100 retroactively divested the ERS of $346.9 million of employer contributions for 1997, 1998, and 1999, thereby eliminating the sources used to fund constitutionally protected "accrued benefits"; and (e) Act 100 undermined the retirement system's continuing security and integrity; (5) article XVI, section 2 of the Hawai`i Constitution is patterned after the New York system, and New York case law similarly requires that the sources of ERS benefits be protected; and (6) other relevant jurisdictions hold similarly. Plaintiffs also challenge the court's June 24, 2003 order granting summary judgment in favor of the State and denying Plaintiffs' two motions for partial summary judgment that were filed on October 1, 2002.

Accordingly, as to Plaintiffs, the court's June 24, 2003 final judgment entered in favor of the State and against the Plaintiffs is remanded to the court with instructions to enter an order dismissing the Plaintiffs' claim for lack of jurisdiction.

As to Trustees, we vacate the court's June 24, 2003 judgment and remand this matter to the court. The court is instructed to enter summary judgment against the State and in favor of Trustees on Trustees' declaratory judgment claim that Act 100 violated article XVI, section 2 of the Hawai`i Constitution. See Univ. of Hawai`i v. City & County of Honolulu, 102 Hawai`i 440, 443-44, 77 P.3d 478, 481-82 (2003) ("`[A] court may enter judgment for the non-moving party on a motion for summary judgment where there is no genuine issue of material fact and the non-moving party is entitled to judgment as a matter of law.'" (Quoting Konno v. County of Hawai`i, 85 Hawai`i 61, 76, 937 P.2d 397, 412 (1997) (Brackets in original.) (Other citation omitted.))). We remand to the court Trustees' other claims for declaratory relief raised in Trustees' Complaint in Intervention (complaint) for disposition as appropriate. The injunctive relief sought by Trustees shall not issue under the circumstances of this case, inasmuch as "the prospective injunctive relief requested by [Trustees] would not appear to be necessary in view of our explication of the applicable law[.]" Rees v. Carlisle, 113 Hawai`i 446, 459, 153 P.3d 1131, 1144 (2007).

I.

The ERS provides retirement benefits to State and county employees, who become members upon their entry or reentry into service of the State or any county. HRS §§ 88-22 (1993), 88-42 (1993). Chapter 88 of the HRS governs the operation of the ERS and vests "general administration and the responsibility for the proper operation" in Trustees. HRS § 88-23 (Supp.2002). The system is funded by contributions from State and county employers, as well as State and county employees. See e.g., HRS §§ 88-45 (Supp.2006), 88-122 (Supp.2006), 88-123 (Supp.2002),4 88-125 (Supp.2002). Pursuant to HRS § 88-127 (1993), Trustees must hold the ERS funds "in trust . . . for the exclusive use and benefit of the system and for the members of the system" and those funds "shall not be subject to appropriation for any other purpose whatsoever." (Emphasis added.) "The assets of the system are assigned to ... (1) [t]he annuity savings fund; (2) [t]he pension accumulation fund;[5] and (3) [t]he expense fund." HRS § 88-109 (Supp. 2006).

"Pursuant to HRS § 88-22, the ERS possesses the full `powers and privileges of a corporation . . . and by [its] name may sue or be sued, transact all of its business, invest all of its funds, and hold all of its cash and securities and other property.'" Chun v. Bd. of Trs. of Employees' Ret. Sys. of the State of Hawaii, 87 Hawai`i 152, 162-63, 952 P.2d 1215, 1225-26 (1998) (citation omitted) (emphasis added). This court has further explained that "pursuant to HRS § 88-23, `[t]he general administration and the responsibility for the proper operation of the [ERS] ... are vested in [Trustees]; subject ... to the area of administrative control vested in the department of budget and finance by HRS §§ 26-8 [ (Supp.2002) ] and 26-35 [ (1993) ]." Id. at 163, 952 P.2d at 1226 (footnotes omitted) (some brackets in original and some added). In that regard then this court has described the powers and duties of Trustees as "functionally equivalent to those of the board of directors of a private corporation and are limited only by `the area[s] of administrative control' reserved to the department of budget and finance by HRS §§ 26-8 and 26-35." Id. (quoting HRS § 88-23).6

Pursuant to HRS chapter 88, Trustees owe a fiduciary duty to the retirement system itself, as well as to members of the system. Honda ex rel. Kamakana v. Bd. of Trs. of the Employees' Ret. Sys., 108 Hawai`i 338, 344, 120 P.3d 237, 243 (2005) (hereinafter, Honda II). In Honda II, Trustees' fiduciary duties were described in the following manner:

HRS § 88-22 (1993), the statute establishing the ERS, provides that the retirement system "shall have the powers and privileges of a corporation." (Emphasis added.) It is axiomatic that a corporation's directors and officers assume fiduciary duties. See Chambrella v. Rutledge, 69 Haw. 271, 274, 740 P.2d 1008, 1010 (1987) (finding that plaintiffs-union members should not be precluded from equitable relief in an action against defendant nonprofit corporation for breach of fiduciary duties); Hawaiian Int'l Fin. v. Pablo, 53 Haw. 149, 153, 488 P.2d 1172, 1175 (1971) ("It is a well established rule both in Hawaii and in a majority of the [s]tates that the relation of directors to the corporations they represent is a fiduciary one."); Lum v. Kwong, 39 Haw. 532, 538 (1952) ("The relation of directors to corporations is a fiduciary one and the well-established rule both in Hawaii and in a majority of the [s]tates is that when...

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